Key Morningstar Metrics for Shopify
- : C$204.00Fair Value Estimate
- : ★★★Morningstar Rating
- : NarrowMorningstar Economic Moat Rating
- : Very HighMorningstar Uncertainty Rating
What We Thought of Shopify’s Earnings
Shopify’s SHOP second-quarter results were notably better than the firm’s outlook and FactSet consensus estimates. Revenue grew 34.0% year over year to USD 3.58 billion, while non-GAAP operating margin was 17.4%. Near-term guidance was better than expected on the top and bottom lines.
Why it matters: Shopify delivered strong results, with upside to our revenue and profitability estimates. Given that the firm provides directional guidance and estimate dispersion is high, results were also meaningfully better than FactSet consensus estimates on the top and bottom lines.
- Strong second-quarter demand was driven by gross merchandise volume, which was up 30% year over year in constant currency, as well as merchant additions, international expansion, and success in offline sales, all consistent with recent quarters. Geopolitical conflicts are still not hurting demand.
- Key items were ahead of our model and consistent with positive ecommerce trends. Second-quarter subscription revenue was USD 802 million (up 22% year over year), merchant solutions came in at USD 2.78 billion (up 37% year over year), and GMV hit USD 100 billion for the third straight quarter.
The bottom line: We raise our fair value estimate to USD 145/C$204 per share from USD 120/C$163 for narrow-moat Shopify. Strong results and better guidance support our estimate increases through 2028 on the top and bottom lines.
- We view the stock as fairly valued. Shares are jumping in Aug. 5 trading, which seems appropriate. Despite artificial intelligence fears for software vendors, we think Shopify should be more insulated because only about 20% of revenue is actually from software. Further, early indications are that agentic commerce will help Shopify.
Coming up: The third-quarter outlook is better than our and FactSet consensus estimates. Guidance includes revenue growth in the low 30s year over year, gross profit growth in the mid- to high 20s, and operating expense at 33%-34% of revenue.
